Uber Technologies Inc. recently received proposals from Wall Street banks valuing the ride-hailing company at as much as $120 billion in an initial public offering that could take place early next year, according to people familiar with the matter.

Uber’s plans now set up a race with rival Lyft Inc., which is also eyeing a debut in the first half of the year, The Wall Street Journal separately reported Tuesday. Lyft’s valuation is expected to top the $15.1 billion it sold shares at privately this year.

Goldman Sachs Group Inc.
and
Morgan Stanley
MS 0.73%
delivered the valuation proposals to Uber last month, the people said. These documents, which typically advise on how to position shares to potential investors, are a common step before banks are formally hired to underwrite IPOs.

Overdrive

At $120 billion, Uber would be worth more than Detroit’s Big Three auto makers combined.

Car makers

$112.2 billion combined

Uber

$120 billion

General

Motors

$45.3B

Ford

$35.1B

Fiat Chrysler

$31.8B

Note: Figures as of Monday close.

Source: FactSet

Over the past year, Uber has labored through a series of scandals, from claims of workplace sexual harassment to the alleged theft of trade secrets from rival
Alphabet Inc.
and the ouster of co-founder Travis Kalanick. Its new chief executive, Dara Khosrowshahi, has sought to win back investors, drivers and riders who can now choose from a growing group of taxi smartphone apps.

Mr. Khosrowshahi had previously said the company is aiming for an IPO in the second half of 2019; at what valuation has been unclear. Uber last raised money, from Toyota Motor Co. in August, at a $76 billion valuation.

There is no guarantee Uber will go public within the expected time frame or at the valuation envisioned by investment bankers hungry for fees. The IPO market runs notoriously hot and cold, and though 2018 has been a strong year for technology and other issues, conditions could be less favorable when Uber is ready to list its shares. Indeed, one person said the banks are pitching the earlier listing in large part because of fears the IPO market will cool.

Competition in ride-hailing has stiffened, which could make Uber shares a tougher sell with public investors. Any IPO process could also be complicated by factions among Uber backers, who received their shares at widely varying valuations.

In documents distributed in recent days related to a potential bond offering—led by Morgan Stanley—Uber indicated it won’t be profitable for at least three years, according to people familiar with the matter. It expects to generate between $10 billion and $11 billion in revenue this year, according to the documents, compared with $7.78 billion last year.

As part of an agreement with investor
SoftBank Group Corp.
9984 -0.91%
, Uber must go public by the end of next year, according to people familiar with the matter. If it fails to do so, Uber would have to allow certain investors—those who have put in at least $100 million or held shares for at least five years—to sell their stakes on the secondary market, these people said.

Lyft, Uber’s most formidable U.S. rival, tapped
JPMorgan Chase
& Co., along with
Credit Suisse Group AG
and
Jefferies
Group LLC, to lead an IPO that may come earlier in 2019, according to people familiar with the matter.

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Should Uber debut at anywhere near a $120 billion valuation, it would deliver spectacular returns for early investors.

First Round Capital, for example, invested about $1.6 million in Uber’s first two rounds in 2010 and 2011, according to term sheets reviewed by the Journal. At a valuation of $120 billion, those shares would be worth more than $5 billion.

Another big winner would be Benchmark, whose Uber stake is currently valued at about $8 billion and would be worth about $14 billion, according to an analysis by the Journal.

Both First Round and Benchmark sold a portion of their shares in January to SoftBank, which, along with its Vision Fund, owns about 15% of Uber.

More than 50 firms have invested in Uber over the years, according to startup tracker Dow Jones VentureSource, not including many individuals who have also put in money. Among them:
Amazon.com Inc.’s
Jeff Bezos, Alphabet Inc. and Goldman, which stands to make hundreds of millions of dollars on an early stake in the ride-hailing pioneer.

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An IPO could also enrich Mr. Kalanick. In January, he sold shares to SoftBank for about $1.4 billion and still owns a stake that at the proposed valuation could be worth billions of dollars more.

The valuations—Goldman’s is slightly lower than Morgan Stanley’s, according to one of the people—hinge in part on highlighting the potential of Uber’s businesses outside its ride-hailing app, like the company’s food-delivery service, UberEats, some of the people said. The valuations also take into account its stakes in other transportation startups including China’s Didi Chuxing Technology Co. and Singapore’s Grab.

Calving off Uber’s self-driving car unit could free it to license its technology to a wider array of car makers and transportation companies. Doing so would remove a business that burns hundreds of millions a year and also insulate Uber from negative headlines like those that appeared earlier this year after one of its vehicles struck and killed a pedestrian in Arizona.